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Babubhai Patel and Co. Vs. Collector of Customs - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Mumbai
Decided On
Reported in(1985)(5)LC1709Tri(Mum.)bai
AppellantBabubhai Patel and Co.
RespondentCollector of Customs
Excerpt:
.....these applications. he raised a preliminary objection as to the competency of the tribunal to grant stay of redemption fine. in that connection shri jain relied upon the provisions of section 129-e of the customs act, 1962. he pointed out that there could be stay only in respect of duty and the penalty and that the tribunal is not vested with any power to grant stay in respect of redemption fine.13. in reply shri patel contended that the preliminary objection raised by shri jain has no merit and that the grant of stay is incidental and ancillary to the appellate power. in support of his contention shri patel relied upon the order passed by this bench to which one of us (shri hegde) was a party, viz., order in s.p. (bom.) appeal no. 230/83, m/s. navrang dyeing (p) ltd. v. collector.....
Judgment:
1. The application for stay arises out of Order No. S/10-122/83C dt.

12-9-83 passed by the Addl. Collector of Customs, Bombay, under which consignment, described as Diethylene Diamine Hydrate of CIF value of Rs. 1,93,448 covered by Bill of Entry No. 2206/89 was ordered to be confiscated and a fine of Rs. 2,00,000 only in lieu of confiscation was imposed. The applicants have filed an appeal against this order which has been registered under No. 1296 of 1983. They had not yet paid the fine and cleared the goods, but request that pending disposal of the appeal they may be allowed to clear the imported goods on payment of duty but without payment of fine on the following amongst other grounds: (a) The imported goods are not a drug canalised under Appendix 9 of the Import Policy.

(b) What is canalised by Appendix 9 are the Active Ingredients of drugs named in Appendix 9, as Active Ingredients and not in any other form.

(c) The Asstt. Drug Controller of the Customs House as well as the other testing laboratories have certified that the goods are not of the descriptions mentioned in Sr. No. 14 of para 3 in Appendix 9 and the Respondent has not given any reason for brushing aside and not following the said certificates.

(d) Respondent has ignored the fact that cost of Hexahydrate is twice that of imported which by itself proves what is stated in item (c) above.

The appellants gave their readiness to execute a personal bond or furnishing a bank guarantee for the amount or fine as a condition precedent to clearance of the goods.

2. Shri Patel, a Partner who was heard on behalf of the applicant briefly referred to the facts leading to the confiscation and imposition of fine in lieu of confiscation, and requested for release on furnishing a bond with a bank guarantee. He did not raise the ground of financial hardship as such, but stated that payment of this heavy fine would mean taking out that much fund from the business and this would be a great hardship. He relied on the decision of this Bench in S.P. (Bom) No. 230 of 1983 wherein in exercise of its discretion the stay of an order confiscating goods and imposing a fine in lieu of confiscation was granted and the goods ordered to be released on furnishing a bank guarantee to the satisfaction of the Collector.

3. Shri Jain at the outset resisted this application for stay on the grounds of jurisdiction. He referred in this connection to Sec. 129-E which was the only provision in the Customs Act giving power to the Tribunal in respect of the discretion regarding pre-deposit. This Section referred only to 'any duty demanded in respect of goods which are not under the control of the Customs Authorities or any penalty levied under this Act.' Flowing from this Rule 28 of the CEGAT (Procedure) Rules, 1982 was evidently promulgated laying down the procedure for filing and disposal of stay petition. That rule makes it clear that every application preferred under the provision of the Acts for stay of the requirement of making deposit of any duty demanded or penalty levied shall be presented etc. This rule does not empower the entertainment of any application for stay in regard to release of goods without payment of fine even on adequate security, and therefore, the Tribunal has no jurisdiction. He also took exception to the discussion on the merits of the order of the Addl. Collector by the applicant.

4. I have had the benefit of the order referred to by Shri Patel which is based on the principle that grant of stay is incidental or ancillary to the appellate power. Shri Jain also in response to my query, agreed that ultimately this Bench had power to reduce or even waive the fine altogether when deciding the appeal; but did not agree that there would be no harm if the goods were allowed to be released after safeguarding the interests of Government by way of bank guarantee. We are here dealing with an order relating to goods in the custody of the department, in respect of which the applicant has been given an option.

Section 129-E and the rule cited by Shri Jain say nothing about such cases and the reason to my mind is obvious. Either the option is exercised and the fine and duty paid and the goods taken possession of; or it is not exercised and the goods allowed to be in custody of the department pending appeal. There is no compulsion. Hence there can be no stay. When the legislature in its wisdom has kept such matters out of the scope of Sec. 129-E, as also the procedure rules, it would be inappropriate to extend our jurisdiction by appealling to ancilary or incidental power. Moreover, a bank guarantee or surety is no substitute for revenue and when the grant of such a facility is not expressly provided for, as in the other two situations covered by Sec. 129-E, the Tribunal would not have any discretion in this regard. I, therefore, agree with the Departmental Representative and while respectfully differing with the precedent of my brothers cited by Shri Patel, would reject this application for release of the confiscated goods on a guarantee. If the option is not exercised the goods should remain in custody and all that can be done is to order that pending the appeal, they may not be auctioned and an early date for hearing the appeal be fixed, so that any deterioration in quality or other possible loss is obviated. The application is accordingly rejected.

5. This stay application arises out of Order-in-Original No.S/10-123/83C dt. 12-9-83 passed by the Additional Collector of Customs, Bombay. An appeal has been filed against this order which confiscated the consignment of Diethylene Diamine Hydrate of C.I.F. value of Rs. 1,82,389 covered by Bill of Entry No. 2206/90, and prescribed a fine in lieu of confiscation of Rs. 2,00,000. The said appeal has been registered as No. 1295 of 83. The facts and circumstances of this case are identical with that dealt with in Stay Application No. 284 of 1983 [In C.D. (Bom) Appeal No. 1296 of 1983]. Both these cases were heard together and the order passed in that case is equally applicable to this one. For reasons stated therein, I reject this application for stay also.

6. Both these applications are by the same party and the relief claimed is identical. The facts involved are similar. They were taken up together for consideration and common arguments were addressed and hence this common order.

7. The Stay Application No. 283/83 arises out of the Order-in-original No. S/10-123/82C dated 12-9-83 passed by the Additional Collector of Customs by which he ordered confiscation of the consignment of Diethylene Diamine Hydrate, cif value of Rs. 1,82,389 but permitted redemption on payment of a fine of Rs. 2,00,000 in lieu of confiscation.

8. The stay application No. 284/83 arises out of the Order-in-original No. S/10-122/83C dated 12-9-83 passed by the Additional Collector of Customs by which he ordered confiscation of the consignment of Diethylene Diamine Hydrate of cif value of Rs. 1,99,448 but allowed redemption on payment of fine of Rs. 2,00,000.

9. The applicants had preferred two appeals : C.D. (Bom.) Appeal No.1295 of 83 and C.D. (Bom.) Appeal No. 1296 of 83 against the two orders of the learned Additional Collector of Customs. The appeals are pending consideration.

10. The identical prayer made in both the applications is that pending the hearing and disposing of the appeals, they should be allowed to clear the imported goods on payment of import duty but without payment of fine and that they are ready and willing to execute a personal bond for the amount of fine or to furnish a bank guarantee for that amount as a condition precedent to clearance of the goods. In both the applications, the applicants urged the following grounds : (a) The imported goods are not a drug canalised under Appendix 9 of the import policy.

(b) What is canalised by Appendix 9 are the Active ingredients of drugs named in Appendix 9, as Active ingredients and not in any other form.

(c) The Asstt. Drug Controller of the Customs House as well as the Chemical Laboratory and Italab Laboratory Ltd., have categorically certified on the basis of composition analysis that the imported goods are neither "Piperazine (Diethylene Diamine) anhydrous" nor "Piperazine (Diethylene Diamine) Hexahydrate" mentioned at Sr. No. 14 of Para 3 of Appendix 9. The Respondent Collector has not given any reason whatsoever for brushing aside and not following the said Certificates.

The Respondent has ignored the fact that the cost of Hexahydrate is double that of imported goods.

11. During the consideration of the applications, Shri C.R. Patel, the learned Advocate for the applicants submitted that the applicants would be put to considerable hardship if they are not permitted to get the goods released by executing a Bank Guarantee. He further submitted that payment of heavy fine imposed would jeopardise the business. It was further urged by Shri Patel that confiscation in both the cases is not absolute and the Customs authorities even after coming to the conclusion that the goods are canalised items have permitted redemption on payment of fine and therefore no prejudice would be caused to the Revenue and the interests of revenue is safeguarded by the Bank Guarantee offered by the applicants.

12. Shri J.M. Jain, Senior Departmental Representative for the Respondent Collector opposed these applications. He raised a preliminary objection as to the competency of the Tribunal to grant stay of redemption fine. In that connection Shri Jain relied upon the provisions of Section 129-E of the Customs Act, 1962. He pointed out that there could be stay only in respect of duty and the penalty and that the Tribunal is not vested with any power to grant stay in respect of redemption fine.

13. In reply Shri Patel contended that the preliminary objection raised by Shri Jain has no merit and that the grant of stay is incidental and ancillary to the appellate power. In support of his contention Shri Patel relied upon the order passed by this Bench to which one of us (Shri Hegde) was a party, viz., Order in S.P. (Bom.) Appeal No. 230/83, M/s. Navrang Dyeing (P) Ltd. v. Collector of Customs, Bombay, wherein the Bench had held that "Even though the Act does not confer the power to grant stay of the redemption fine, it is settled law that the grant of stay is incidental and ancillary to the appellate power. The appellate court has always inherent power to grant stay of the operation of the order appealed against if the circumstances warrant such stay".

14. Having regard to the order above-quoted, it would not have been necessary for me to deal with the question of jurisdiction but for the reason that my learned brother Shri A.J.F.D'Souza has taken a view contrary to the view taken by the Bench in the Stay Petition No. 230 of 1983. I have had the advantage of going through the order of my learned brother. The view taken by my learned brother is not only not in conformity with the decision of the earlier Bench and a larger Bench but also opposed to the law laid down by the Supreme Court.

15. The Stay Petition (Bom.) No. 56/83, K.S. Diesels Ltd. v. The Collector of Customs, Bombay which arose out of the Order-in-Appeaj No.313/1983 by difference of opinion between the two members. Shri Gourishankar Murthy and Shri K.S. Dilipsinhji, had been referred to by the President under Section 129-C of the Customs Act to the Senior Vice-President Shri Venkatesan, dealing with the jurisdiction to grant stay in respect of matters which are not covered by the Act. This is what the learned Senior Vice-President observed in paragraph 21 : "Reference has been made to the order dated 5-5-83 of the West Regional Bench which has been cited by the Departmental Representative, and in which a view was taken that a stay could not be granted in such a case. It has been observed therein that the goods were not under Customs control and therefore there were no grounds for the grant of a stay. No view has been expressed as to whether an appeal lies or does not lie in such a case. So far as the question of stay is concerned, the order has not gone into the question of the distinction between waiver of pre-deposit of duty under Section 129-E, Customs Act and grant of stay of realisation.

It is quite true that the question of pre-deposit does not arise in respect of goods which are under the control of the Customs authorities. Accordingly, the question of waiver of pre-deposit in terms of the proviso to Section 129-E also would not arise. However, the grant of stay restraining the Customs authorities from taking measures for realisation of duty or penalty is not referable to Section 129-E. The power to grant such a stay is not exercised in terms of any specific provisions of the Customs Act, but of the incidental and ancillary powers of the Tribunal as an appellate authority. This has been made clear in the judgment of the Supreme Court in the case of Income-fax Officer v. Mohammed Kunhi, reported in (1969) 71 ITR 815. That case was with reference to the Income-tax Act, but the judgment has been followed by the Andhra Pradesh High Court in a case under the Central Excises and Salt Act, viz., K.V.N. Prasad and Ors. v. Central Board of Excise & Customs and Ors., reported in 1978 ELT (J 397). The provisions of the Central Excises and Salt Act relating to appeals, which were before the Andhra Pradesh High Court in that case, are pari materia with those of the Customs Act which are before the Tribunal in this case. Therefore, in a case like this, where the question of pre-deposit of duty does not arise, but nevertheless action is proposed to be taken by the Customs Authorities for realisation of the duty demanded, the Tribunal clearly has the power to order a stay, in the exercise of its incidental and ancillary powers as an appellate authority." 16. Having regard to the decision of the larger Bench, no Member of this Bench can take a view different from the view taken by the larger Bench unless the larger Bench's view has been subsequently modified, or over-ruled by another larger Bench. I am respectfully in agreement with the views expressed by the Senior Vice-President and in my opinion, the view expressed by the Senior Vice-President is in accordance with the decision of the Supreme Court which is binding on all the Courts including the Tribunal under Article 141 of the Indian Constitution.

The ratio of the decision of the Supreme Court as well as the Senior Vice-President was that the Tribunal has power to order a stay in exercise of its incidental and ancillary powers as an appellate authority. This was the view taken in Stay Petition No. 230/1983-avrang Dyeing (P) Ltd. v. Collector of Customs, Bombay. In the said circumstances I painfully differ from the view expressed by my learned brother Shri D'Souza in para 4 of his order.

17. Now coming to the merits of the case, as has been stated earlier, the Customs did not confiscate the goods absolutely. Even after coming to the conclusion that the imported goods are canalised items, it permitted the clearance on payment of fine in lieu of confiscation.

Shri Jain did not contend that the Tribunal has no power to set aside the order of the learned Additional Collector on consideration of the appeal. As a matter of fact, to the specific query of my learned brother, Shri Jain submitted that the Bench has power to reduce or even waive the fine altogether when deciding the appeal. The grant of stay is an interim relief and it is a discretionary relief. The authority vested with the discretion shall have to exercise the discretion judiciously and not arbitrarily or capriciously. It also cannot refuse to exercise the discretion if the circumstances and facts of the case warrant exercise of such a discretion. The only point of difference between the Department and the applicant is that the department has no objection to release the goods if fine amounts are paid. The applicants, however, find it difficult to pay the full fine amount as it would affect their business but willing to safeguard the interest of the department by executing a Bank guarantee to the satisfaction of the Collector. My learned brother, in the course of his order has observed "Moreover, a bank guarantee or surety is no substitute for revenue and when the grant of such facility is not expressly provided for, as in the other two situations covered by Sec. 129-E, the Tribunal would not have any discretion in this regard." I am unable to subscribe to the view .expressed by my learned brother. The effect of releasing the goods is that the department loses control over it. It is not contended that the goods are of hazardous character. If the release of the goods is considered hazardous or harmful the Customs would not have released on payment of fine. If the applicant pays the fine amount it can get possession immediately. The applicant had challenged the order by filing an appeal. The appeal is yet to be heard. If the appellant succeeds he is entitled for possession without payment of fine. If he fails and desires to take possession he will have to pay the fine imposed. If the stay is not granted the department after the period stipulated in the order can auction the goods and in that event the possibility of the applicant not getting the goods, becauss he may bs outbidden, cannot be ruled out. Thus the balance of convenience and equity is in favour of the applicant. When such is the position the Bench, in my opinion, should exercise its discretion in favour of the applicant. The grant of applicant's prayer will not be less favourable to the Revenue. Its interest is secured by Bank Guarantee. In addition it could immediately realise the duty in cash. The course suggested by my learned brother helps neither the Revenue nor the applicant.

18. Taking all aspects into consideration I allow these applications and direct release of the goods on the applicants furnishing Bank Gurarantee fair the fine amounts and paying duty within two weeks from the date of communication of this order.

19. As we differ on the following points, they are referred to the President under Section 129-C(5) of the Customs Act, 1962 : 1. The competence of the Tribunal to grant stay in respect of redemption fine in lieu of confiscation, and 2. Whether on the facts and circumstances of the case there should or should not be stay of the redemption fine.

20. Since there was difference of opinion between the learned Member (Technical) and learned Member (Judicial) who heard these applications for interim relief earlier, the matter has been assigned by the President to me for disposal under Section 129-C(5) of the Customs Act, 1962.

21. After giving due notice, I have heard the applicants (represented by Shri C.R. Patel, advocate) as well as the respondent (represented by Shri J.M. Jain, S.D.R.) 22. The applicants relied on the case law cited in the learned Member (Judicial's) Order to say that this Tribunal had jurisdiction to grant the interim relief asked for. They added that they had already paid for the value of the goods (about Rs. 3.75 lakhs). In addition, customs duty of a little over Rs. 4.00 lakhs was payable. Since the goods were held up in the docks for the last one year, demurrage may have to be paid to the Port Trust Authorities. If, over and above all these, the applicants were called upon to pay the redemption fine of Rs. 4.00 lakhs, imposed in these two cases, it would be a financial strain on them. They stated that there would be no loss to the Government if their request was granted since they were willing to give a Bank Guarantee for full value of the fine with 12% interest.

23. The Departmental representative stated that though he agreed that the Tribunal, as an Appellate Authority, had incidental and ancillary powers to grant interim reliefs, the present request of the applicants to give a Bank Guarantee instead of paying redemption fine in cash did not fall within the category of incidental and ancillary powers as Section 125 of the Customs Act provided for payment of redemption fine in cash if the importer wanted release of the confiscated goods. He stated that bank guarantee was no substitute for cash payment. The Government needed cash for its day to day expenses and bank guarantee could not be a substitute for the cash. He stated that Rule 17 of the Customs Appeal Rules, 1982 as well as Rule 28 of CEGAT Procedural Rules, 1982 provided for waiver of the condition of pre-deposit and for stay of recovery in the case of duty and penalty only. This was quite understandable because there could be cases where in appellant felt that coercive action by the Department for recovery of duty and penalty was imminent and the appellant wanted to be saved of such coercive action. But there was no scope for such coercive action in the case of redemption fine. It was entirely the discretion of the importer whether to take release of the confiscated goods or not. He added that the test of undue hardship should be applied more rigorously in the case of the interim relief asked for in the present applications. The appellants were a big export house having import-export turn over-running into crores of rupees. They had not even pleaded any undue financial hardship in their applications. He asserted that there could be no undue hardship in paying the redemption fine because in return the applicants would get the goods in their hands.

24. I have carefully considered the matter. I agree with the learned Member (Judicial) that as an Appellate Authority this Tribunal has the incidental and ancillary power to grant the interim relief asked for by the present applicants. But it is quite another matter to say whether such relief should be granted in the present cases. In respect of stay of recovery of duty and penalty, Section 129-E of the Customs Act lays down two criteria (1) undue hardship that would be caused to the applicant, and (2) safeguard of the interest of revenue. In my view, these are sound principles for considering the stay of payment of redemption fine as well even though Section 129-E as such does not apply to payment of redemption fine. Ordinarily speaking, there should be no question of undue hardship in the matter of payment of redemption fine. It is common knowledge among the importing community that the redemption fine adjudged in respect of the imported goods is normally not in excess of the margin of profit on the goods. In other words, the redemption fine is a part of the market value of the goods. The case of penalty is different inasmuch as the pentalty comes out of the pockets of the importer. But the redemption fine only neutralises the importer's profit, in part or in full. On payment of the redemption fine, the importer gets possession of the confiscated goods which otherwise vest in the Government. The importer can realise his profit by trading the goods as such or after subjecting them to further manufacture etc. So far as the present two cases are concerned, it has not been shown that the impugned orders are palpably bad on the face of them. The only hardship involved in paying the fine that has been pleaded is that the applicants would have to part with some cash which would cause difficulty in running their own business. This sort of ground can be taken respect of any amount held payable to Government.

The departmental representative has rightly pointed out that the Government also needs cash for running its day to day affairs. Bank guarantees are no substitute for it. When there is in existence an adjudication order passed by a competent authority which on the face of it is not void, to say that moneys held payable to Government need not be paid for years till the final court of appeal has given its verdict on the merits of the case is not fair to the Revenue.

25. It is not as if the applicants are helpless in the matter when their goods are lying in docks. It is common knowledge among the importers that high priority is given to hearing of cases where goods are under detention. Such cases are listed as live Bill of Entry cases.

In the present case, I am surprised to know from the applicants that they had not even approached the Tribunal for a priority hearing of their appeals. Had they done so earnestly, probably the appeals themselves would have been decided finally by now.

26. In sum, while agreeing with the learned Member (Judicial) that this Tribunal has incidental and ancillary powers to grant interim reliefs, I do not agree with him that in the present cases balance of convenience and equity lies in favour of accepting the request of the applicants to take bank guarantee with 12% interest in lieu of payment of redemption fine in cash. Accordingly, I reject both the applications.

27. In accordance with the order of the majority of the members who have heard these two applications the applications are rejected.

However, as these are cases of live Bills of Entry, the two connected appeals shall be listed for hearing on merits on 14-2-1984.


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